Savings banks' deposits fall below 100 trillion won... Declining for 4 consecutive months

As of late July, 99.9128 trillion KRW
Loans below 100 trillion for 3 months... 18 consecutive months of decline

The deposit balance of savings banks, which have been lowering deposit interest rates and handling loan products conservatively to manage soundness, fell below 100 trillion won. This is the first time in about 2 years and 8 months since November 2021.

According to the Bank of Korea Economic Statistics System on the 20th, the deposit balance (end balance) of mutual savings banks as of the end of July recorded 99.9128 trillion won. The deposit balance decreased by nearly 1% compared to 100.8861 trillion won at the end of June, marking the fourth consecutive month of decline since the end of March.

The loan balance (end balance) also decreased for 18 consecutive months since January last year. The loan balance at the end of July was 96.9415 trillion won, down 1.0651 trillion won from 98.0066 trillion won at the end of June. Loans have remained below 100 trillion won for three consecutive months through July, after falling below 100 trillion won in May for the first time in 2 years and 6 months.

Since the Legoland incident, savings banks have focused on soundness management by lowering deposit interest rates and handling loan products conservatively due to a sharp increase in interest expenses from high-interest products since the end of last year. However, recently, they have shifted direction toward increasing deposit inflows by raising interest rates on savings and time deposits in line with expectations of a base rate cut.

Meanwhile, the savings bank industry expects to exit the deficit by the first half of next year at the latest and is discussing with financial authorities ways to resolve the project financing (PF) concentration phenomenon. The 79 savings banks nationwide posted a total net loss of 380.4 billion won in the first half of this year. The deficit expanded by 283.9 billion won compared to the same period last year, and the loss increased by 226.1 billion won compared to the previous quarter.

Earlier, Oh Hwa-kyung, president of the Korea Federation of Savings Banks, said at a press briefing, "The timing of profitability improvement depends on the speed and volume of disposal of non-performing business sites," adding, "If all non-performing business sites are disposed of soon, losses will increase once, but performance will improve thereafter." She also cautiously forecasted, "It would be best if the deficit period continues only until the end of this year, and I think the bottom will be passed after the first half of next year."